New research from Bain & Company points to a sharp decline in CEOs’ relative prioritization of sustainability, as AI, growth, inflation, and geopolitical uncertainty have risen to the top of their agendas.
Slowing momentum on sustainability could come with a tangible cost. Bain estimates a temperature increase of 2 degrees Celsius could cut $6 trillion from the value of the S&P 5001, in addition to the devastating environmental and social consequences.
However, Bain’s research shows companies are struggling to meet their existing commitments. Of the companies disclosing their progress via CDP, 30% are well behind on their Scope 1 and 2 emissions reduction goals, and almost half are behind on Scope 3.
Many companies are reassessing, adjusting, and, in some cases, retracting their climate commitments. These are among the findings of Bain & Company’s “Visionary CEO’s Guide to Sustainability 2024,” released today.“The transition to a sustainable world is following a familiar cycle,” said Jean-Charles van den Branden, Bain’s global Sustainability practice leader. “What began a few years ago as boundless excitement has given way to pragmatic realism. As the challenge of meeting bold commitments becomes clear, many companies are rethinking what is achievable and on what timeline. But slowing progress would be a mistake. Our research shows many sustainable technologies are likely to reach their tipping point more quickly than expected. Forward-thinking companies will stay the course and lead the way as a mix of new technologies, consumer and customer behavior, and smart policy creates valuable opportunities for their industries.”
Extreme weather fueling increasing consumer concern about climate change
Even as CEOs deal with competing priorities, the message from consumers around the world is clear. In a Bain survey of nearly 19,000 consumers in 10 countries, 61% of people said their concerns about climate change have increased over the past two years, often sparked by personal experience of extreme weather. Consumers in Brazil, Indonesia, and Italy—geographies that have experienced devastating weather events in recent months—show the most increasing concern for climate change. And while 76% of global consumers believe a sustainable lifestyle is important “because their actions have an impact,” consumers in Brazil (90%), Indonesia (90%), and Italy (84%) feel an even greater sense of accountability for their own environmental footprints.
When it comes to sustainable shopping, consumers say brands and retailers play a big role in their decision-making process. While personal experience with extreme weather is the top reason consumers say they decided to buy sustainable products, 35% say they made the choice due to media articles and documentaries, 33% attribute it to availability, and 28% credit awareness campaigns by brands and retailers.
Bain’s research points to the imperative for consumer companies to de-average shoppers—engaging them less as a monolith and more as a complex group of specific customer segments, prioritize packaging that is both recycled and recyclable, and forge partnerships across the value chain to create greater accessibility to sustainable products.
Sustainability remains a top concern for B2B buyers
It’s not just consumers who are shopping for sustainability. Bain’s survey of 500 B2B buyers and sellers shows sustainability is now one of corporate buyers’ top three purchasing criteria, and 36% say they would leave suppliers that don’t meet sustainability expectations. Nearly 60% say they’ll be willing to do so three years from now. Likewise, Bain’s survey found nearly 50% of corporate buyers said they would pay a sustainability premium of 5% or more today, and they expect their willingness to pay to increase in the future.
This message seems to be getting lost on suppliers. While 85% of suppliers say they embed some degree of sustainability in their products and services, only 27% consider themselves very knowledgeable about their customers’ sustainability needs.
Bain outlines four steps—on customer, value, salesforce, and pricing—suppliers can take to start selling sustainability smarter.
Bringing AI and sustainability together to generate business value
Consumers and customers continue to rate sustainability as an important purchase criterion, but they often lack a clear understanding of what makes a product or service sustainable. Bain suggests AI can help close this gap by providing more effective approaches to communicate about sustainable products and propositions.
“We advise companies to incorporate AI into their sustainability strategies to boost both innovation and resilience,” said Eric Partner and member of the Energy & Natural Resources and Sustainability practices at Bain & Company in the Middle East “However, it’s crucial that they account for and mitigate AI’s impact on carbon emissions right from the start. By embedding sustainability from the outset, businesses can take the lead in shaping a greener, tech-driven future.”